Compared to a year ago, industrial output rose 0.9 percent in September but retail sales fell 1.9 percent.

Toru Suehiro, senior market economist at Mizuho Securities, said: "Looking at the production report, I think GDP will lack strength and post a small gain, which would increase calls for stimulus measures to boost growth.”

Saturday, 29 October 2016

The S&P 500 fell 0.3 percent after news that the Federal Bureau of Investigation was reviewing new evidence on Democratic presidential candidate Hillary Clinton’s email server. US stocks fell despite a report earlier on Friday showing that the economy grew at an annual rate of 2.9 percent in the third quarter.

Bonds were relatively stable after two days of sharp declines. Nevertheless, the US 10-year Treasury yield edged up to 1.847 percent, its highest since 27 May.

While October closed on a weak note for stocks, next week starts a new trading month, one which has historically kicked off the best six-month period for stocks. According to Adam Shell at USA Today, the Dow Jones industrial average has posted average gains of 7.4 percent in the November-through-April period compared to a 0.4 percent return May-through-October.

“The seasonally bullish pattern has a better-than-average chance of playing out this year,” Doug Ramsey, chief investment officer at Leuthold Group, was quoted as saying.

In contrast, David Santschi, CEO of TrimTabs Investment Research, is positioning his firm’s model stock portfolio “defensively”, saying that there are “plenty of cautionary signs”.

Friday, 28 October 2016

The US 10-year Treasury yield rose six basis points to 1.85 percent, pushing the S&P 500 down 0.3 percent.

European bonds also fell, with the UK 10-year gilt yield rising 10 basis points to 1.27 percent, the highest since the Brexit vote in June, after a report showed that the economy grew 0.5 percent in the July-September period, better than the forecast 0.3 percent.

According to Gary Pollack, a head of fixed-income trading at Deutsche Bank, the sell-off in bonds was the result of “a combination of better economic growth and changing expectations for monetary policies going forward”.

Oil rose though. West Texas Intermediate and Brent crude both rose about one percent.

“Earnings growth is going to be really, really key for continued growth in the market, even though we’ve muddled along without that for a while,” said Karyn Cavanaugh, senior market strategist at Voya Investment Management.

Wednesday, 26 October 2016

Despite the weak performance of US and European stocks on Tuesday, some see opportunity in them.

Ed Yardeni of Yardeni Research said in a note on Tuesday that while the overall stock market looks fully valued, "there may be room for stock multiples to expand further, especially for beaten-up sectors like financials and health care".

Richard Barley at The Wall Street Journal wrote that after lagging other markets for most of 2016, European stocks are now looking relatively attractive in value. He said that the STOXX Europe 600 excluding the UK trades on 14.7 times the next 12 months’ earnings compared to 16.6 times for the S&P 500.

The STOXX Europe 600 fell less than 0.1 percent, with the IBEX 35 propping the continent's stocks by rising 1.3 percent.

US bonds fell, with the yield on the 10-year Treasury note rising to 1.763 percent from 1.740 percent on Friday.

US stocks were boosted by some better-than-expected earnings.

“Both sales and earnings have been positive so far,” said Michael Arone, chief investment strategist at State Street Global Advisors. “This quarter has the potential to end the earnings recession.”

Indeed, an end to the earnings recession, an active mergers and acquisitions market and the largest initial public offering of the year happening this week “are essentially bullish signs for the market,” said Randy Frederick, director of trading and derivatives at Charles Schwab, according to a CNBC report.

Monday, 24 October 2016

Reuters reports that US corporate earnings are turning positive after four consecutive quarters of contraction and that could provide a second wind for stocks.

[S]tronger-than-expected profit reports from companies such as Microsoft and Bank of America have turned the tide and the blended earnings growth estimate for the third quarter sits now at 1.1 percent. This would effectively end the earnings recession...

"With the earnings recession showing signs of ending this quarter, the economy is on firmer footing, which could lead to your typical end of year strength," said LPL's senior market strategist Ryan Detrick.

Saturday, 22 October 2016

Both the S&P 500 and STOXX Europe 600 were little changed while in Asia, the Shanghai Composite Index rose 0.2 percent but the Nikkei 225 fell 0.3 percent.

Microsoft broke above its record high hit during the technology boom in 1999 after reporting results on Thursday that beat analyst forecasts.

Indeed, Jack Caffrey of JPMorgan Private Bank told CNBC that after more than a year of back-to-back quarters of earnings declines for stocks, the picture is "finally turning higher" and that stocks will soon reap the benefits of earnings momentum.

And with fund managers also worried about an EU breakup, a bond crash and Republicans winning the White House, it is little wonder then that their cash balances rose to 5.8 percent of their portfolios in October, up from 5.5 percent last month and approaching levels not seen since November 2001.

Monday, 17 October 2016

U.S. equity prices have been supported for the past three decades by an acceleration of global trade and a freer flow of capital. Those lifted economic growth and allowed companies to take advantage of new markets and economies of scale. The S&P 500 is up nearly ninefold since October 1986, according to FactSet.

But now there is worry that the party is ending. “We believe globalization has probably reached its peak,” said Marino Valensise, head of the multiasset team at Barings, a member of the MassMutual Financial Group with $275 billion in assets under management. “The market won’t like it.”

Earlier this month, a Bloomberg report had highlighted similar views from Bank of America Merrill Lynch.

Some of the hottest trades of the past few years could stage a sharp reversal as global markets face "peaks" in liquidity, free trade, and income inequality.

That's the big-picture call from Bank of America Merrill Lynch, whose analysts argue in a report published Thursday that an apparent fightback against globalization in advanced economies represents a game-changer for global asset-allocation.

For Thomas Lee of Fundstrat Global Advisors, the latest gyrations are just turbulence on a ride that will leave the market higher by 9 percent come 2017. RBC Capital Markets LLC’s Jonathan Golub and Bank of Montreal’s Brian Belski, with Lee among the bull market’s biggest cheerleaders, say the rocky start to earnings matters little. They’re declaring the longest profit recession since the financial crisis over, clearing the path for equities to rally into the new year.

Thursday, 13 October 2016

The yield on the US 10-year Treasury note rose to 1.778 percent from 1.760 percent on Tuesday.

The British pound rose 0.7 percent against the dollar to $1.2207 after four consecutive days of losses.

US crude oil fell 1.2 percent after the Organization of the Petroleum Exporting Countries said its production rose last month.

The release of the Federal Reserve's minutes from the September monetary policy meeting provided little direction for markets. It noted that several members thought a rate hike was needed “relatively soon” but added that “a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation”.

Still, Randall Kroszner, an economics professor at the University of Chicago Booth School of Business, told Bloomberg that “a rate hike is very likely by the end of the year”.

The Nikkei 225 rose one percent and the Shanghai Composite rose 0.6 percent.

However, the KOSPI fell 1.2 percent, dragged down by an eight percent plunge in Samsung Electronics after the latter halted sales of its Galaxy Note 7 mobile phone, while the Hang Seng fell 1.3 percent, with developers hit by measures in some Chinese cities to cool property prices.

US crude oil jumped 3.1 percent after Russian President Vladimir Putin said he supported international efforts to limit oil output.

Meanwhile, US stocks could see further gains as a major headwind dissipates.

Bloomberg reports that while analysts predict that net income for S&P 500 Index members fell 1.6 percent in the July-September period to extend the earnings recession to 18 months, US companies have exceeded their forecasts by an average margin of 3.6 percentage points in the past five years.

When the latter is taken into account, the third quarter could yet turn out to be a positive one for US corporate earnings growth.

“Among the nine instances when companies emerged out of prolonged sluggishness, stocks posted gains in all but two,” the report said.

Monday, 10 October 2016

That is down from 16 percent in August and the lowest number since 10 percent in February 2015.

However, Bank of America-Merrill Lynch's head of US equity and quantitative strategy Savita Subramanian warned that “we're going to hit a recession sometime in the second half of next year”.

“We are seven years into a full-fledged, all out, central bankers doing everything they can to stimulate demand,” she said. This has made the market fragile. “There are a lot of itchy trigger fingers. There's lot of violent trades that can really roil a fairly complacent environment.”

While the report suggests that the US economy remains resilient, Karyn Cavanaugh, senior market strategist at Voya Financial, thinks that “there is trepidation among investors because of the writing on the wall for a December rate increase”.

On the other hand, some economists think that 2016 could be the worst year of growth since the 2009 recession. CNN reports that Oxford Economics expects the US economy to grow 1.5 percent while Fitch Ratings forecasts a growth rate of just 1.4 percent.

Lindsey Piegza, chief economist at Stifel, thinks that the US will “just slowly slide into recession over the next couple of years”.

Helping to boost US stocks was a 2.3 percent rise in US crude futures, a welcome relief for energy stocks, which are expected to report an earnings decline of 67 percent in the third quarter from a year earlier.

Niladri Mukherjee, a strategist at Merrill Lynch Wealth Management, recommended that investors stick with stocks for now, despite the risk of mounting political and policy uncertainties and elevated valuations.

“Broadly speaking, we still expect equities to outperform fixed income as global growth is picking up and earnings revision ratios have improved in recent months,” he said.

However, the International Monetary Fund warned in its Fiscal Monitor report released on Wednesday that global growth could be hampered by high debt levels.

“At 225 percent of world GDP, the global debt of the nonfiancial sector...is currently at an all-time high,” it said. “There are concerns that the sheer size of debt could set the stage for an unprecedented private deleveraging process that could thwart the fragile economic recovery.”

Wednesday, 5 October 2016

The S&P 500 fell 0.5 percent but the STOXX Europe 600 and the Nikkei 225 both rose 0.8 percent.

US Treasuries fell, with the yield on the 10-year note rising to 1.683 percent from 1.624 percent on Monday.

“The feeling in the overall market is that the Fed will raise rates sooner rather than later,” said Ted Weisberg, a trader at Seaport Securities.

Adding to concerns of diminishing monetary stimulus is a Bloomberg report that “the European Central Bank will probably gradually wind down bond purchases before the conclusion of quantitative easing, and may do so in steps of 10 billion euros ($11.2 billion) a month, according to euro-zone central-bank officials”.

Despite the weak start to the fourth quarter for US stocks, Paul Eitelman, investment strategist for North America at Russell, said that in the event of a “significant selloff in the United States, we would want to buy that dip because we think the economic fundamentals are OK”, Bloomberg reported.

However, Eitelman also said that a muted outlook for earnings and rate hikes by the Federal Reserve could derail the market. “In our view the risks are asymmetrically skewed toward a more negative outcome,” he said.

Saturday, 1 October 2016

The S&P 500 rose 0.8 percent but the STOXX Europe 600 was flat and the Nikkei 225 tumbled 1.5 percent.

Markets have been driven by concerns over Deutsche Bank in recent days and it was no different on Friday. The German bank's stock fell 9 percent early in European trading but recovered to end up 6.4 percent after a report suggested that it was near a deal with US officials to reach a settlement related to its dealings in mortgage securities.

“The odds of a large hole in bank balance sheets are pretty minimal at this point,” said David Lefkowitz, senior equity strategist at UBS Wealth Management Americas.

However, Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management, said that “the eurozone banking system is still an overriding question”.

David Lebovitz, global market strategist for JPMorgan Asset Management, told CNBC that there “is a lot of headline risk right now” in financials but added that “the one pocket of value that is left is financials”.